Why does everything seem so expensive now
As the days grow darker, the mood in the UK is heightening as we head into another harsh winter. Things are bleak. Once we started getting some semblance of normality back from the jaws of COVID – which, FYI, still a lot – Manal cost of living crisis He hits.
Today you can expect to spend a lot more on absolutely everything than you did a year ago as prices are rising faster than they were 40 years ago. Food prices are on the rise, with prices in shops By 5.1 percent in Augustor for fresh food specifically, 10.5 percent — the highest rate recorded since 2008.
Meanwhile, the cost of keeping our homes warm has skyrocketed. Liz Truss promised a total freeze on energy bills At £2,500 per year from October 1 to 2024 it could prevent households from paying the £3,549 that was originally set by Ofgem’s energy price cap, but it still means paying much more than we were. Prepaid meter customers, for example, will need to find £264 cash for energy in January alone, according to Resolution Foundation Analytics.
Aside from the cost of food and utility bills, the prices of non-essential items are also on the rise. Even Panini football poster albums are not immune to price hikes. . World Cup Album Filling Qatar 2022 will cost around £870with each sticker pack priced at 90p, up from 80p it cost for the Russia 2018 edition and 50p for the Euro 2016 edition. Thanks a lot, inflation.
But what exactly is inflation, and how did we find ourselves in this hellish situation? We spoke with experts to help us understand it all.
What exactly is inflation?
David Spencer, Professor of Economics and Political Economy at the University of Leeds says that inflation is the general increase in the price level of something.
Overall, UK inflation rose above 10 per cent for the first time in four decades when it reached 10.1 percent in the year through July before diluting a little to 9.9 percent in August. Goldman Sachs expects it to continue rises to 22 percent Next year.
But, says Morten O. Raven, professor of economics at University College London, there is an important difference between the cost of living crisis and inflation.
“Usually the way we think about inflation also includes the rate of increase in wages,” he explains. “What is happening now is that the prices of the things we buy are going up but not our income. What we can buy with our salaries is going down. Pure inflation will also be going up as our salaries go up at the same rate. That’s why this [situation we’re in] It is more of a cost-of-living crisis than pure inflation.”
How is inflation calculated?
Inflation can be measured using several methods, but the most common is the percentage change in price over time for a sample of goods and services in an imaginary form.Shopping basket“.
“The contents of the basket are defined as the kinds of things people buy in the UK,” says Kevin Albertson, professor of economics at Manchester Metropolitan University. “Price changes are brought together by weighting all individual price changes by how important these items are to UK consumers. For example, if we buy twice as much chocolate as we buy carrots, price changes in chocolate are twice as important as the price change in Carrots are, therefore, twice as heavy as when incorporating the general index.”
Why is inflation so high now?
Several factors are at play here, including the rising cost of food, oil, gas, and other fuels. But as for the reasons behind this, Brigitte Granville, professor of international economics and economic policy at Queen Mary University of London, names the COVID pandemic and lockdowns, the Russian war in Ukraine, and the resulting economic sanctions and disruption of global supply chains among them. .
Raven adds that the “Brexit effect” is likely to contribute to higher prices in the UK as well. Among the results of Brexit, the devaluation of the pound, which fell to the level The lowest level in 37 years last Friday. As the value of sterling falls, the price of everything Britain imports rises, Raven explains, and “the loss of sterling’s value is fueling UK inflation.”
Granville goes on to explain the role that commodity scarcity plays in rising prices, and thus inflation. “The economy depends on scarcity, so when something is scarce, it costs a lot of money because a lot of people want it.”
Albertson adds that the world is generally short on resources, which means that what we have has to be rationed. The result is realistic. “With prices rising faster than wages, people who don’t earn as much money are being forced out of the market, so the people who have the most money can buy whatever they want. That’s obviously not very fair, but that’s how Markets operate.
But I didn’t get a raise!! Why are wages not in line with inflation?
The simple answer to this, says David Spencer, Professor of Economics and Political Economy at the University of Leeds, is that not all workers have the capacity to raise wages. This is why so many people are facing a decline in real wages. “Power tends towards employers, not workers, in the UK at least,” he says.
How will all this affect me?
Albertson’s previous comments may have already given you some ideas, but there’s more.
“It would be disastrous,” warns Granville. Before that, in the 1970s, we used to have what is called wage inflation adjusted, so wages were adjusted for inflation. It was bad because it means you can never get rid of inflation, but at least people can live. Now we don’t have that. So what does that mean? This means that in real terms, for example, let’s imagine that you bought a kilogram of sugar last week and it cost £3, and now the same kilogram of sugar would be £10, but your salary has not changed.”
Albertson agrees that most people in the UK will see their quality of life deteriorate in the short term, but he has some hope for young people. “In the long run, young people have more time to run than people my age, and we might hope things get better,” he says. “This is because technology may improve the energy efficiency we have access to. This means that we may need less energy to maintain the quality of life.”
But this takes work, now.
“In the same way that governments have been involved in the search for a vaccine for COVID, governments need to take the lead in developing sustainable technology,” Albertson says. “In the meantime, they also have to take the lead in making sure the people who need the most help get the most help.”
How can I live like this exactly?
Albertson says, in short, as simple and sustainable as possible.
But, in the end, it is not up to us ordinary people on Earth to solve this situation. “It’s up to the Treasury and the chancellor to get involved in the policies that allow people to do business in some way,” Raven says. “That would be special tax policies for the poor and a better distribution of income. If we spend on income distribution, we’ll be able to.” [ensure quality of life] For the poorest people and to beat inflation, so it is much better to introduce targeted policies.”
How the hell did we get into this mess?
Albertson points to governments around the world and how they have come to terms with the idea that economic growth can go on forever. But that’s not entirely realistic without action.
“This requires continuous improvement in technology, since we have a record stock of resources,” Albertson explains. Recently, technological improvements have not been enough to offset the decline in our stock of resources. Therefore, demand is greater than supply in relation to the current level of production.”
Is there any hope at all?
Spencer is reassured, there is always hope. “The economy can be reformed in ways that allow the majority to thrive,” he says. We have had periods of inflation in the past. The key is to ensure that lower inflation does not come at the expense of higher unemployment.”